Robert Kiyosaki’s cash flow quadrant, speaks about the different dynamics of income potential of the 4 types of people – Employees, Self-Employed, Businessmen and Investors. He explains the reasons why businessmen & investors have a far greater potential to get rich, and even have tax rules written in their favor.
Difference between the 4 Quadrants
Employees & Self-employed both work for their money.
Business owners have other people work for their money. They may not be that smart themselves, but they know how to surround themselves with smart people.
Investors have their money work hard for them. Investors want money velocity – they want to put in their money, multiply it and get it back quickly.
You will never know true freedom until you achieve financial freedom.
The Problem with the Employee & Self-Employed Quadrants
Wealth Principle: There’s nothing wrong with getting a steady paycheck, unless it interferes with your ability to earn what you’re worth. There’s the rub. It usually does.
Dealing with Uncertainty & Failure
To be successful as an investor or a business owner, you have to be emotionally neutral to winning and losing. Winning and losing are just part of the game.
To me, one of the primary reasons E’s and S’s have difficulty moving to the B and I side is because they are too afraid of making mistakes.
When the fear of losing money and failing becomes too painful inside, a fear we both have, he chooses to seek security and I choose to seek freedom.
Remember that anything important can’t really be learned in the classroom. It must be learned by taking action, making mistakes, and then correcting them. That’s when wisdom sets in.
Only fools expect everything to go the way they want.
Other concepts on Money
We all want to be rich, but only a few of us have a ‘Money Mindset’. The rich thoughts & feelings around money are in perfect alignment to attracting money into their lives. The poor and the middle class on the other hand, have thoughts & feelings about money that are often negative in nature, and therefore struggle to attract money despite their best efforts. Having the right money mindset is foundational to being rich.
While the unsuccessful see obstacles as barriers to the way to success and a reason to quit, the successful often see these as opportunities for further learning, greater profit or lower competition. Successful people have a ‘can-do’ attitude and don’t let obstacles come in the way.
When you run a business, the business is dependent on your presence to run. When you own a business, the business will function and generate profits regardless of your presence. The vast majority or entrepreneurs both own & run their business, making their business nothing much more than a glorified and highly lucrative job. To experience true freedom, you need to learn to own a business that is built to be able to operate without you.